14 Jan Surcharges on Property held in Trusts
After the property market experienced a spike in its price in 2017, particularly in Sydney, Melbourne and Brisbane, additional taxes and duties were levied by state government on land to be purchased or owned by “Foreign Persons”. The new taxes include surcharge on land tax and surcharge on stamp Duty.
Definition of “Foreign Person” or “Trust”
An individual, who is not an Australian citizen, is a foreign person if they are not ordinarily resident (been in Australia during 200 or more days in the previous calendar year) in Australia.
The definition of foreign persons extends to partnerships, trusts, companies and governments.
If you would like to know whether you are a “Foreign Person” or not, you can book a free consultation with iAdvice to seek assistance from their experts by clicking on icon below.
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When is a trust called “Foreign Trust”
When a person owns assets in a Discretionary Trusts, they have more flexibility to distribute income or capital. To achieve maximum flexibility, trust deeds are drafted defining beneficiaries widely which includes family members. That wide definition is interpreted as possibly including a Foreign Person. This happens since the trustee of a discretionary trust has the authority to distribute the income or all assets of the trust to one or more beneficiaries who may be a foreign person.
Rates of Surcharges in each state
From 1st July 2017 the surcharge Purchaser Duty i.e. rate additional to standard stamp duty are:
- NSW – 8%
- VIC – 7%
- QLD – 3%
The Surcharge Land Taxes to apply in addition to the standard rates are
- NSW – 0.75% from 1/1/2017
- NSW – 2% from 1/1/2018
- VIC – 1.5% from 2017 land tax year
- QLD – 1.5% on land value of $350k or more from 2017 land tax year.
Concerned about your discretionary trust
If you need any help regarding your discretionary trust including trust deed and eligibility of your trust in new surcharges, you can book a free consultation with iAdvice to seek assistance from their experts by clicking on icon below.
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